Whether the value of media services provided abroad are included in the Gross taxable value of Advertising agency services?

PJ/CASE LAW/2016-17/3055

Case-GREY WORLDWIDE (INDIA) PVT. LTD. Versus COMMISSIONER OF S.T., MUMBAI

Citation-2015 (40) S.T.R. 1104 (Tri. - Mumbai)

Issue-Whether the value of media services provided abroad are included in the Gross taxable value of Advertising agency services?

Brief Facts-This appeal is directed against Order-in-Original No. 24/STC-I/BR/10-11, dated 19-8-2010.The relevant facts that arise for consideration are the appellant is an advertising agency registered with the department. They had undertaken an advertisement campaign for Ministry of Tourism, Govt. of India for campaign “India as tourist destination” in print and electronic media and outdoor hoardings in London, New York and Paris and also discharged the service tax liability on the amount of agency commission received from Govt. of India. It is the case of the Revenue that the appellant is required to discharge service tax liability on the amount of rent and other expenses incurred on such hoardings and would get covered under the category of “Advertising Agency Services”. The appellant has contested the show cause notice on merits as well as on limitation. Adjudicating authority after following due process of law, did not agree with the contention raised and confirmed the demands with interest and impose penalty under Sections 76 and 77 of the Finance Act, 1994.

Appelants Contention-Learned CA after taking us through the records would submit that the amount recovered by the appellant as ‘media costs’ from the Ministry of Tourism is not in relation to the advertisements but the expenses for putting up the hoardings, sale of space, etc. He would submit that media costs on the sale of space was taxable from 1-5-2006 and not prior to that. He would submit that the activity undertaken by them are for display of outdoor hoardings on advertisement and bill board and conveyance vehicles abroad and it would be covered more specifically for tax from 1-5-2006 under the category of “sale of space or time for advertisement”. He would submit that this view has been taken by the Bench in the cases of Zee Telefilms Ltd. v. CCE - 2006 (4)S.T.R.349 (Tri.-Mum.) and IndianNational Shipowners Association v. UOI - 2009 (14)S.T.R.289.It is his next submission that the media services which are provided by the appellant are outside India (beyond territorial waters of India) hence not liable to service tax. It is his submission that the hoardings, bill boards and the conveyance on which advertisement campaign were undertaken at abroad; he would be relying upon the Board’s Circular No. 36/4/2001/-S.T., dated 8-10-2001 for the proposition that amounts charged by advertisement agency for ‘sale of space or time for advertisement’ in print media and electronic media is not includible in the value of taxable service. It is his submission that the same view has been decided by the Tribunal in the case of Prithvi Associates v. CCE - 2006 (1)S.T.R.32 (Tri.-Mum.) and followed in the case of Foster Wheeler Energy Ltd. v. CCE - 2007 (7)S.T.R.443 (Tri.-Ahmd.). He would submit that identical issue as to the tours and travels undertaken by Cox and Kings was considered by the Bench and held that the operation of tours which was conducted abroad is not taxable. It is his submission that this case law is reported in 2014 (35)S.T.R.817 (Tri.-Del.).On limitation it is his submission that the Ministry of Tourism refused them to pay service tax on media costs on the ground that such services are not taxable as the contract is with the Govt. of India.

Respondents Contention- Learned D.R. on the other hand would submit that the entire activity of design and execution of the advertisement was in India for Ministry of Tourism, Govt. of India. It is his submission that the service provider and recipient of service are in India and has been correctly charged, as the value which is to be included for discharge of service tax liability is the gross value. He would submit that the advertisements on bill board, hoardings and conveyances (media vehicles and buses) even if they are in abroad, service tax liability arises. It is also his submission that the appellant having not declared the correct value, hence invoking of extended period is right.

Reasoning Of Judgement- The tribunal have considered the submissions made by both sides and perused the records. There is no dispute as to the fact that the appellant is covered under the category of “advertising agency services” and discharge the service tax liability on the agency commission received by them. The only dispute is regarding the value that needs to be added for discharging service tax liability. The Revenue’s case is that the amount received by the appellant from the Ministry of Tourism, Govt. of India, towards the media costs is required to be considered as gross value for services rendered by the appellant hence the said amount needs to be included into the gross value of the services rendered. First and foremost, they find that the adjudicating authority has incorrectly appreciated the fact that the service tax liability sought to be recovered from the appellant is in respect of outdoor campaign. It was not in dispute that the hoardings/bill boards and media costs and the advertisement published in print and electronic media were abroad i.e. London, New York and Paris. If that be so, the advertisement campaign has to be looked into as to who is the service recipient and service provider. In the case in hand it is not in dispute that the media costs were incurred by the appellant beyond the territorial waters of India and the ratio of judgment of Cox and Kings (supra) would be directly applicable. They find that this decision of this Tribunal in the case of Cox and Kings (supra) was considering the issue wherein the appellant therein was conducting international tours, Revenue authorities wanted to tax entire amounts/considerations received under the service tax liability, Tribunal held that for the services rendered by the appellant beyond the territorial waters of India, service tax would not be charged even if the tour emanates from India and ended in India and even if tourists being Indians. We reproduce the ratio of the judgment : -
“(m) On the aforesaid analysis we conclude that the consideration received for operating and arranging outbound tours, even if falling within the scope of the amended definition of “tour operator”; (provided by the assessees and consumed by their tourist customers beyond Indian territory), is not liable to levy and collection of service tax, under provisions of the Act. They hold that provisions of the Act do not have an extra territorial operation. The conclusion and analysis on this issue (issue No. (b) is without prejudice to our analysis and conclusion on issue No. (a), that since the assessees had provided a composite service, of operating outbound tours apart from engaging in the business of planning, scheduling, organizing or arranging such tours; and by a mode of transport other than in a tourist vehicle, the service falls outside the definition of “tour operator”.
The ratio of the said judgment will be applicable in the case in hand as the facts in hand not at all in dispute that the media costs incurred by the appellant were in respect of bill boards, hoardings and conveyance abroad. Accordingly, on this point they hold that the appeal needs to be accepted and they do so. The appeal filed by the appellant is allowed and impugned order is set aside. As regards various other points raised by both sides, tribunal find that since they have allowed the appeal on merits of the case, they are not recording any findings on other points. Impugned order is set aside and the appeal is allowed.
Decision-Appeal allowed
Comment-The gist of the case is that since the media costs is incurred in respect of bill boards, hoardings and conveyance abroad i.e. beyond territorial waters of India the value of such outdoor campaign is not included in the valuation of advertising agency services.And, decision of Tribunal in the case of Cox and Kings is squarely applicable to this case. Therefore, the assessee is not require to pay service tax on the whole amount received by the appellant from the Ministry of Tourism, Govt. of India, towards the media costs.
Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3055

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